The persistence of drought impacts across growing seasons: a dynamic stochastic analysis

Agricultural producers throughout much of the United States experienced one of the most severe droughts in the last 100 years during the years 1999-2006. The prolonged nature of this drought highlights a need to better understand the impacts and management of drought across growing seasons, rather than just within a growing season. Producers express specific concern about the tendency of drought impacts to persist even after drought itself has subsided. The persistence of drought impacts has received limited attention in the economics literature. The objectives of this study are two-fold: 1) to determine whether inter-year dynamics, in the form of agronomic constraints and financial flows, can cause persistence of a drought's impact in years subsequent to the drought, and 2) to determine whether the impact of one year of drought can alter the impact of a subsequent year of drought. A multi-year, dynamic and stochastic decision model is developed in a discrete stochastic programming framework and solved to address the objectives. The structure and parameters of the farm-level model are based on irrigated row crop farms in eastern Oregon, USA. Analysis of the model's solution reveals the following results: 1) the impact of a drought can persist long after the drought subsides, and 2) the impact of one year of drought can alter the impact of a subsequent year of drought. Potential implications for the administration of drought-related assistance are discussed briefly.